Governor offers cuts to balance '03 budget

But his plan to close gap of $550 million would tap into rainy-day fund

January 04, 2003|By Jeff Barker and David Nitkin | Jeff Barker and David Nitkin,SUN STAFF

Departing Gov. Parris N. Glendening unveiled a package of state agency budget cuts and other moves yesterday that he said would close a $550 million gap in the current year's budget and avoid layoffs.

Glendening's solution, however, taps into a surplus account known as the rainy-day fund, which Gov.-elect Robert L. Ehrlich Jr. and leading lawmakers say they prefer not to use for fear of jeopardizing the state's bond rating.

"I don't like it. We believe the rainy-day fund should be and can be preserved intact," said Ehrlich spokesman Paul E. Schurick. "The size of the state government is not shrinking, and that's the problem."

The governor's moves come as Ehrlich and his staff put the finishing touches on the next state budget, which they'll present to lawmakers in about two weeks.

Maryland's eroding fiscal health was a major issue during the gubernatorial campaign, with Ehrlich pledging to be a better steward than Glendening or Lt. Gov. Kathleen Kennedy Townsend.

Shortly after the election, Glendening - who has been roundly criticized for not acting on budget problems sooner - pledged to work with Ehrlich toward acceptable solutions.

Glendening aides say the governor is fulfilling a pledge to leave office with a balanced budget and a surplus for next year. They say the state will have $615 million in cash available in a variety of accounts, including the rainy-day fund, to help pay for next year's budget - which has a projected $1.2 billion shortfall.

In a proposal that is similar to one released in November, Glendening wants to eliminate 1,560 state jobs that are either unfilled or vacant due to a hiring freeze imposed in 2001. An additional 1,087 jobs were eliminated during the past six months.

In all, the agency reductions would total $174 million in the fiscal year ending June 30. The executive branch would take the biggest hit - 5.8 percent. By comparison, education reductions in the package totaled just 1 percent.

The administration is asking the Board of Public Works - made up of the governor, Comptroller William Donald Schaefer and Treasurer Nancy K. Kopp - to approve the cuts at its Wednesday meeting.

The package's other budget-balancing moves, such as the use of reserves and a change in the way the state withholds income taxes, require approval of the General Assembly, which convenes for its annual session Wednesday.

Critics said the plan relies on short-term fixes while leaving larger budget problems unresolved. The governor's plan would take $189.4 million from the rainy-day fund, leaving it almost $200 million below the amount preferred by Wall Street bond-rating agencies. Higher ratings from those agencies enable Maryland to issue debt at lower interest rates, saving the state money.

Glendening has often said that he hopes to avoid layoffs because he doesn't want to balance the budget - a requirement of the state constitution - on the backs of employees.

Del. Howard P. Rawlings, a Baltimore Democrat and chairman of the House Appropriations Committee, said Glendening had essentially punted the budget problem to Ehrlich and the General Assembly.

"What he has done is attempt to resist addressing the real problem of reducing the cost of government," Rawlings said. "All he has done is use one-time-only funding sources that camouflage a very serious fiscal problem."

But Lynch countered: "If you don't spend the money, and you're not going to spend it next year, it's a cut. That's as real a cut as you can get."

Rawlings criticized Glendening for ignoring a recommendation by a fiscal advisory panel known as the Spending Affordability Committee not to tap the surplus account.

"The committee has loudly and forthrightly said we do not support using the rainy-day fund to address the fiscal '03 deficit," Rawlings said.

Lynch said it was ultimately up to the General Assembly whether to use that money or other state reserves.

"Having cash reserves is a very important item," Lynch said. "If the legislature chooses to take none from the rainy-day fund and use other reserves, that's fine with the governor."

Glendening and his staff blame the state's budget woes in part on the national economic downturn and on mandatory spending for Medicaid and local education.